Introduction

The concept of running a federal deficit can be controversial and glossed over by politicians who use it to justify:

Increased spending on public services such as infrastructure, education, and defense. Systems of usury exploiting society through debt.

While the government does invest in crucial areas, the primary concern lies in its fiscal responsibility and the sustainable use of borrowed funds. This article explores the economic implications of running a federal deficit and debunks common myths surrounding its perceived benefits.

Understanding Federal Deficits

A federal deficit occurs when a government's expenses exceed its revenues in a given fiscal period. Advocates argue that deficits can be beneficial during economic downturns, citing theories from economists like John Maynard Keynes. However, critics raise valid concerns about the long-term consequences of indefinitely running deficits and the associated high interest payments.

Keynesian Economics vs. Public Choice Economics

Keynesian Economics:

This theory posits that governments can stimulate economic growth during recessions by borrowing and spending. The rationale is that by utilizing unused resources such as labor and capital, the economy can be jumpstarted. While this may seem beneficial in the short term, it overlooks the long-term costs of increasing public debt and the associated interest payments.

Public Choice Economics:

According to this theory, politicians may use deficit spending as a way to appease interest groups and garner votes. This is often referred to as "distributed costs, concentrated benefits." Politicians can raise revenue through taxes and borrow money, then spend it on projects that benefit specific interest groups, thereby increasing their chances of being re-elected. This practice is criticized for its short-sighted nature, as it relies on economic booms to cover the eventual interest payments and budget deficits.

The Risks of High Deficits

Running a federal deficit has significant long-term risks:

High Interest Payments: The U.S. government pays substantial interest on its public debt, which can drain national resources and exacerbate economic hardships for citizens. Sustainability Concerns: Persistently high deficits can lead to economic instability, as the government may rely on future economic growth to cover past spending. Fiscal Responsibility: Politicians may be more inclined to allocate resources to short-term gains rather than long-term investments, undermining the goals of public spending.

Economic Myths Debunked

There are common myths surrounding federal deficits that need to be addressed:

The Economic Downturn Myth: While Keynesian principles may suggest that deficits can help during a downturn, the long-term benefits are questionable. The focus should be on sustainable economic growth rather than short-term stimulus. The Political Gain Myth: Critics argue that politicians use deficit spending to secure votes and political support. This practice is unethical and unsustainable. The Usury Myth: Running a federal deficit can be seen as a form of usury, where the government exploits society through the accumulation of debt and high-interest payments.

Conclusion

The debate over federal deficits is complex, with valid points on both sides. However, the risks of indefinitely running a deficit and incurring high interest payments cannot be ignored. It is crucial for policymakers to prioritize fiscal responsibility and sustainable economic practices to ensure long-term stability and prosperity.